TMI Blog2005 (9) TMI 272X X X X Extracts X X X X X X X X Extracts X X X X ..... enact a legal fiction providing that the profits and gains of new industrial undertaking shall be computed as if the new industrial undertaking were the only business of the assessee from the date of its establishment and the past years depreciation and losses are to be set off against the income of assessee from the undertaking. Therefore, the new industrial undertaking is retrospectively quarantined or isolated from the other income-producing activity for determining the profits and gains for the purpose of eligibility u/s 80-I. Hence, the order passed by the Assessing Officer giving effect to the order of CIT(A) allowing deduction u/s 80-I without setting off unabsorbed losses from assessment year 1991-92 against the income for assessme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to Rs. 160.59 lakhs. If the brought forward loss had been set off against the profit of the eligible unit for the relevant assessment year, no deduction under section 80-I could have been allowed in terms of section 80-I(6) of the Income-tax Act. Therefore, the ld. Commissioner considered the order passed by the Assessing Officer giving effect to the order of CIT(A) to be erroneous and prejudicial to the interests of revenue. He, accordingly, issued notice to the assessee on 6-6-2003 proposing to revise the order of the Assessing Officer dated 28-3-2002. 3. Before the ld. Commissioner it was submitted by the assessee's counsel that since the CIT(A) has already decided the issue relating to section 80-I no action under section 263 could ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eous and prejudicial to the interests of revenue. Aggrieved by the said order of the ld. Commissioner, the assessee is in appeal before the Tribunal. 5. Before us, the ld. AR of the assessee submitted that ITAT, Chennai Bench-C in the case of TTK Pharma Ltd. v. Asstt. CIT [IT Appeal No. 2698 (Mad.) of 1994] for assessment year 1991-92 considered this issue in favour of assessee and held that once the losses of one unit has been set off, there is no question of carrying them forward notionally and setting them off against the income of the unit in subsequent years. While allowing the claim of the assessee reliance was placed by the Tribunal on the decision of Hon'ble Supreme Court in the case of Rajapalayam Mills Ltd. v. CIT [1978] 115 I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the context of Indian Income-tax Act, 1922) held that there was nothing in section 15C(3) or any other provisions of the Act which required that in computing the profits or of a new industrial undertaking under section 10, depreciation allowance or development rebate in respect of the new industrial undertaking for the past assessment years should be taken into account, even if it has been set off fully against the profits or gains of any other business carried on by the assessee or against income under any other head and there was no unabsorbed depreciation allowance or development rebate to be carried forward. The ld. DR further submitted that section 80-I(6) does enact a legal fiction providing that the profits and gains of new industri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 80-I(6) contains non obstante clause which have overriding effect on other provisions of the Act. According to section 80-I(6), the profits and gains of an eligible assessee for the purpose of determining the quantum of deduction under section 80-I(1) for the assessment year immediately succeeding the initial assessment year or any assessment year are to be computed as if such eligible industrial undertaking or eligible ship or eligible business of the hotel or eligible business of repairs to ocean going vessels or other powered craft were the only source of income of the assessee during the previous year relevant to that initial assessment year and to every subsequent assessment year up to and including the assessment year for which the de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... off fully against the profits or gains of any other business carried on by the assessee or against income under any other head and there was no unabsorbed depreciation allowance or development rebate to be carried forward. However, under section 80-I(6), a legal fiction has been provided for the computation of profits and tins of new industrial undertaking according to which profits and gains shall be computed as if the new industrial undertaking were the only business of the assessee from the date of its establishment and the past years' depreciation and losses are to be set off against the income of assessee from the undertaking. Therefore, the new industrial undertaking is quarantined or isolated from other income-producing activity ..... X X X X Extracts X X X X X X X X Extracts X X X X
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